Guitar Center to be bought by Bain Capital

NEW YORK Guitar Center Inc. GTRC.O said on Wednesday it agreed to be acquired by private equity firm Bain Capital Partners LLC for about $1.9 billion plus assumed debt.

Under the terms of the deal, Guitar Center stockholders will receive $63 in cash per share, marking a 26-percent premium over its closing price on Tuesday, the musical instruments retailer said in a statement.

As of March 31, the company had 30.17 million diluted shares outstanding, as reported in its first-quarter earnings report.

Total value of the transaction, expected to close in the fourth quarter, is approximately $2.1 billion including assumed debt, the company said.

Goldman Sachs served as a financial advisor to the company.

Guitar Center shares were up 18.8 percent or $9.44 at $59.50 on the Nasdaq after hitting a high of $60.35 earlier in the session.

In May it was reported there was market speculation that Guitar Center was exploring a possible sale and had hired an investment bank to explore strategic alternatives.

Credit Suisse analyst Gary Balter said the company "seems like the perfect LBO."

"They have a dominant retail position in a high service business yet significantly under-earn other high service oriented retail segments," Balter wrote in a research note following Guitar Center's announcement.

Balter added he would not be surprised if the company's Music & Arts division, specializing in band instruments for teachers, band directors and students, is sold after the current deal is closed.

Bain Capital, along with two other private equity firms, recently agreed to buy home improvement retailer Home Depot Inc.'s (HD.N) supply division for $10.3 billion.

(Reporting by Aarthi Sivaraman, with additional reporting by Debojyoti Ghosh in Bangalore)

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